Below is the exercice and solutions but I don't understand the solution, for example the cash collection from debitors. Thanks for help. Use the information below and prepare a cash budget for April, May, and June. Month Sales Purchases Wages Exp. Jan. (actual) 80,000 45,000 20,000 5,000 Feb. (actual) 80,000 40,000 18,000 6,000 Mar. (actual) 75,000 42,000 22,000 6,000 Apr. forecast 90,000 50,000 24,000 6,000 May forecast 85,000 45,000 20,000 6,000 Jun. forecast 80,000 35,000 18,000 5,000 You are further informed that: 10% of purchases and 20% of sales are for cash. The average collection period of the company is half a month and credit purchases are paid off regularly after one month. Wages are paid half monthly and the rent of $500, excluded in expense, is paid monthly. Cash and bank balance on April 1 was $15,000, and the company aims to keep it below this figure at the end of every month. The excess cash is placed in fixed deposits. Solution April ($) May ($) June ($) Cash & bank balance 15,000 11,700 12,700 Add: Cash sale (20%) 18,000 17,000 16,000 Cash collections from debitors. 66,000 70,000 66,000 99,000 98,700 94,700 Less: Cash outflow Cash flow (10%) 5,000 4,500 3,500 Payment of Creditors. 37,800 45,000 40,500 Wages 23,000 22,000 19,000 Rent 500 500 500 Exp. 6,000 6,000 6,000 Fixed deposits 15,000 8,000 13,000 Cash balance (closing) 21,700 12,700 13,200 99,000 98,700 94,700
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Below is the exercice and solutions but I don't understand the solution, for example the cash collection from debitors. Thanks for help.
Use the information below and prepare a
|
Month |
Sales |
Purchases |
Wages |
Exp. |
|
Jan. (actual) |
80,000 |
45,000 |
20,000 |
5,000 |
|
Feb. (actual) |
80,000 |
40,000 |
18,000 |
6,000 |
|
Mar. (actual) |
75,000 |
42,000 |
22,000 |
6,000 |
|
Apr. |
90,000 |
50,000 |
24,000 |
6,000 |
|
May forecast |
85,000 |
45,000 |
20,000 |
6,000 |
|
Jun. forecast |
80,000 |
35,000 |
18,000 |
5,000 |
You are further informed that:
- 10% of purchases and 20% of sales are for cash.
- The average collection period of the company is half a month and credit purchases are paid off regularly after one month.
- Wages are paid half monthly and the rent of $500, excluded in expense, is paid monthly.
- Cash and bank balance on April 1 was $15,000, and the company aims to keep it below this figure at the end of every month. The excess cash is placed in fixed deposits.
Solution
|
April ($) |
May ($) |
June ($) |
|
|
Cash & bank balance |
15,000 |
11,700 |
12,700 |
|
Add: |
|||
|
Cash sale (20%) |
18,000 |
17,000 |
16,000 |
|
Cash collections from debitors. |
66,000 |
70,000 |
66,000 |
|
99,000 |
98,700 |
94,700 |
|
|
Less: |
|||
|
|
|||
|
|
5,000 |
4,500 |
3,500 |
|
Payment of Creditors. |
37,800 |
45,000 |
40,500 |
|
Wages |
23,000 |
22,000 |
19,000 |
|
Rent |
500 |
500 |
500 |
|
Exp. |
6,000 |
6,000 |
6,000 |
|
Fixed deposits |
15,000 |
8,000 |
13,000 |
|
Cash balance (closing) |
21,700 |
12,700 |
13,200 |
|
99,000 |
98,700 |
94,700 |
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